Legal update on sales & marketing activities in 2014

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Major changes in UK legislation and regulation will radically impact sales & marketing activities in 2014, warns law and marketing guru Ardi Kolah and author of best-selling Essential Law for Marketers

UK-based companies will face a major shake-up in how they conduct consumer sales and marketing activities over the next 12-months in the wake of a raft of new laws and regulations emanating from the UK and European Union (EU).

"UK-based companies will face a major shake-up in how they conduct consumer sales and marketing activities over the next 12-months in the wake of a raft of new laws and regulations emanating from the UK and European Union (EU)," explains law and marketing guru Ardi Kolah.

Defamation Act 2013

"This comes into effect on 1 January and is a piece of legislation that swings the pendulum in favour of freedom of expression with a number of important changes that impact statements made online and provides more protection to website operators and other online intermediaries," explains Kolah.

For example, under the 2013 Act, web site operators now have a new defence where they can show that they didn’t post a defamatory statement on the website.

However, as with most laws there are exceptions to this rule and this defence won’t succeed in certain circumstances:

  •     claimant can show it wasn’t possible to identify the individual who posted the defamatory statement that would enable an action to be brought
  •     notice was given to the web site operator of the complaint in question and the operator fails to respond to that notice in accordance with the provisions of the Defamation (Operators of Websites) Regulations 2013, that also come into force on 1 January.

In the latter situation, the website operator needs to act within 48 hours of receiving a complaint by notifying the poster of the statement or if this isn’t possible, to remove the statement within this 48-hour timeframe.

Kolah feels this places an onerous administrative burden on website operators and leaves a legal question mark over the situation where the poster of the comment is anonymous.

From a practical perspective, Kolah recommends the following steps that website operators should consider taking in order to minimise the possibility of a successful legal action being taken against them:

  •     implement an efficient complaints system;
  •     review internal policies to provide guidance to employees when a debate or expression of opinion crosses the line and is deemed to be defamatory;
  •     add a 'report abuse' button to the website;
  •     introduce a 'traffic light' system for assessing the nature of a complaint that’s been received and corresponding scale of target reaction given the severity of the nature of the complaint;
  •     in the terms and conditions (T&Cs) to which every website user signs up to must contain a clear definition of an 'offending post' and an explanation that, if the Operator receives a legitimate complaint of an offending post and on the complainant's request, the post may be removed;
  •     also in the T&Cs should be clear, 'acceptable use' policies, removing rights of user generated content (UGC) and adding a 'disclaimer' to the website stating that the website operator isn’t involved in the creation of the content posted; and
  •     have an 'opt in' check box that users need to use to accept the T&Cs of posting material onto the website.

Pay-day loans and marketing of financial products to consumers

Office of Fair Trading is scrapped and Financial Conduct Authority assumes responsibility for regulating sales and marketing of pay-day loans

From the 1 April, the Office of Fair Trading (OFT) will cease to exist and a new regime for the regulation of consumer credit products under the gaze of the Financial Conduct Authority (FCA) comes into force.

"The new watchdog has been given sharper teeth as the Government has indicated it wants to get tougher on sales and marketing practices such as those for popular pay-day loans where there’s a high risk of consumer harm," says Kolah.

The FCA will have more of a focus on advertising and promotion of retail financial services than the OFT and the former Financial Services Authority (FSA) that tended to act more like a statutory back-up for the ASA.

According to Kolah, the FCA is expected to introduce new rules requiring payday lenders to carry ‘health warnings’ across all advertising.

Other measures are also expected to include stricter market entry criteria for those wanting to offer consumer credit products such as pay-day loans; appointment of suitably qualified individuals within such organisations to regulate sales and marketing activities and tougher legal redress for consumers when things go wrong.

The FCA will operate an interim regime for regulation of consumer credit 1 April 2014 – 1 April 2016 in order to give companies time to adjust to these and other changes in the regulation of the market.

Alcohol sponsorship

Drinks industry self-regulator The Portman Group will launch the first UK-wide Sponsorship Code that will come into effect on 31 January. Although the Code is separate from the Code of Practice on Naming, Packaging and Promotions, it’s consistent with existing measures that prevent any type of promotion that may appeal to those under the age of 18 years-old as well as being in alignment with the BCAP and CAP Codes as set down by the Advertising Standards Authority (ASA). A major difference will now be the requirement of brand owners to promote responsible drinking and/or support community activities as part of an overall sponsorship programme.

New Consumer Bill of Rights 2014

As discussed in Essential Law for Marketers, the Government has signaled its intention to merge all existing UK consumer protection laws and regulations together with the requirements of the finalised EU Consumer Rights Directive into a single new Consumer Bill of Rights.

The Consumer Rights Bill sets out a framework that consolidates in one place consumer rights covering contracts for products and services, digital content and the law on unfair terms in consumer contracts.

In the UK, there are 12 existing laws and regulations relating to consumer protection that will be replaced by a single Consumer Bill of Rights and include:

  •     Consumer Protection (Distance Selling) Regulations
  •     Unfair Terms in Consumer Contracts Regulations 1999
  •     Misrepresentation Act 1967
  •     Sales of Goods Act 1979
  •     Sale and Supply of Goods and Services Act 1994
  •     Supply of Goods (Implied Terms) Act 1973
  •     Unfair Contract Terms Act 1977.

Changes to current legal protections available to consumers will represent “the biggest overhaul of consumer law for decades” says Kolah. In practical terms, it could mean that Trading Standards can operate over local authority boundaries that they can’t do at present, and provide enforcement agencies sharper teeth to prosecute marketers that habitually flout the new law.

These changes will require a radical readjustment to the many ways that businesses operate at the point of sale, says Kolah.

"In particular, technology, media and telecoms businesses that provide software and entertainment products to consumers to be downloaded at the time of sale will need to be aware of that the changes that will be required. Marketers operating in Europe should take the opportunity to review their sales and marketing practices, both online and offline to ensure that they will be compliant when the new legislation comes in to force," he says.

Class actions brought by consumer groups could become more common

In 2013, the European Commission published its recommendations on common principles for collective actions in the EU that invited Member States to adopt collective redress mechanisms including injunctions and damages for breaches in EU laws. This requires consumer groups to have been identified before a claim can be brought and each member of that group to have ‘opted-in’ to bring a class action to court.

"The result is that UK courts could see a rise in class actions and this is likely to accelerate once the Consumer Bill of Rights also becomes law," says Kolah.

Counterfeit marketers face new EU-wide laws

On 1 January a new EU-wide Customs Enforcement Regulation comes into force in the UK that aims to increase cross-border protection against the traffic in counterfeit goods, including pharmaceuticals, between Member States or into the EU.

The Regulation implements a more simplified procedure for dealing with suspected counterfeit goods in the absence of a court order across all 28 Member States and in certain circumstances allows brand owners to apply for certain small consignments of fake products to be dealt with automatically by Customs Officers ex officio.

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Ardi Kolah
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